EXTERNAL SHOCKS AND DOMESTIC FRAGILITY: A POLITICAL ECONOMY ANALYSIS OF KENYA

This paper examines how renewed geopolitical disruption around the Strait of Hormuz and the wider maritime system could affect Kenya, arguing that the country's core vulnerability lies less in exposure to any single external shock than in the shrinking ability of the state to absorb and redistribute imported costs under conditions of fiscal compression and weakened legitimacy. Drawing on official macroeconomic data, regulatory documents, audit reports, Afrobarometer evidence, and verified reporting on shipping, energy, and fiscal developments, the analysis situates a possible Hormuz-related shock within a longer sequence of externally generated disturbances already absorbed by Kenya, including COVID-19, the Ukraine war, freight rerouting, and disrupted IMF programme continuity. The paper shows that Kenya enters 2026-2027 with partial macroeconomic buffers - adequate reserves, moderate inflation, and continued growth - but with narrow discretionary room due to revenue shortfalls, high debt, dependence on domestic borrowing, and a damaged fiscal social contract. It argues that fuel-price governance, subsidy opacity, contested taxation, and coercive protest management are the main domestic mechanisms through which external cost pressures become political. The central risk, therefore, is not immediate macroeconomic collapse, but the progressive translation of imported-price stress into governability strain, anti-incumbent mobilization, and legitimacy erosion ahead of the 2027 elections. The paper concludes with a scenario framework showing that Kenya's most plausible pathways involve prolonged imported-cost pressure and selective cushioning rather than abrupt systemic rupture, but that these middle scenarios may nonetheless have significant political consequences.